- Unallowable purpose and deemed loan relationships (Travel Document Service and Ladbroke Group v HMRC)
- Original news
- What are the practical implications of this case?
- What was this case about?
- What were the facts?
- What were the main legal arguments?
- What did the Upper Tribunal decide?
- Application of the unallowable purpose rule to deemed loan relationships
- Ascertaining purpose
- Attributable on a just and reasonable basis to an unallowable purpose
- What should lawyers take note of?
- Case details
Tax analysis: The Upper Tribunal (UT) upheld the decision of the First-Tier Tribunal (FTT) concerning the application of the loan relationships ‘unallowable purpose’ rule to a deemed loan relationship held by one of the taxpayers, Travel Document Service (TDS), as part of a tax avoidance scheme. The unallowable purpose rule was capable of applying in the case of a deemed (as opposed to an actual) loan relationship and, based on the facts established before the FTT, TDS was found to have a main purpose of securing a tax advantage. The UT also upheld the FTT’s finding that the deductions of the other taxpayer in relation to an actual loan relationship should be disallowed under the unallowable purpose rule. The taxpayers’ appeals were dismissed.
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